April, 2008

March, 2008

October, 2007

In 2008 George Bush famously explained that the financial crisis came about because “Wall Street got drunk“. Today a close ally of the UK chancellor, George Osborne, has a different explanation – “Too much testosterone“.

But we don’t need to rely on politicians, lets look at the data found in a 2010 report by Professor Murdock of the Loyola University Chicago School of Law. The report shows that:

Fraudulent inducement. Banks sold sophisticated, negative-amortization loan mortgages to people who they knew could neither understand the terms nor make the repayments. 87% could not identify the cost of the loan and 30% could not identify a balloon payment. The Banks knowingly pushed so-called ‘pick and pay loans’. A tiny percentage of the recipients were opportunists – the vast majority were (and are still) victims.

Fraudulent selling. Mortgage Brokers received both higher fees and an extra kick-back from the lender when they sold sub-prime mortgages. There is clear evidence of Brokers persuading people who would qualify for a conventional loan to take a sub-prime instead. In Florida 10,000 convicted criminals work in the mortgage industry. Brokers have been found to falsify documentation and transactions, taking home millions.

Fraudulent derivatives. The banks took these very risky loans (which they knew would fail) and packaged them up as triple AAA rated derivatives. They knew they were junk, but they lied to their clients. They gathered bad loans together with the occasional good one and created an exponential Ponzi scheme of Collateralised Debt Obligations and Credit Default Swaps.

Fraudulent ratings. The banks induced the various Rating Agencies to classify all these very risky derivatives as rock solid, gold-plated triple-AAA rated investments. The rating agencies did it because a) they were paid to by the banks and b) they received an on-going fee for the life of the derivative.

Fraudulent foreclosure. When the inevitable housing collapse arrived the Banks fraudulently foreclosed on millions of people, using fraudulent techniques like ‘Robo-Signing‘.

Fraudulent banks. They are not really banks, they are really criminal sydicates who use the banking facade to cover their illegal activities. For example, one of the biggest US banks, Wachovia, was recently found to have laundered billions of dollars in the drugs trade.

The criminal racketeering and fraud perpetuated by the financial industry is clear – there is massive, incontrovertible evidence for anyone who cares to look. Just spend a few minutes on the internet and you will find the evidence from all kinds of reputable sources. Why do we (and our politicians) not look?

The references above relate to the USA, but are true of financial services around the globe – driven by fear and greed. These criminal activities are not restrained to banks but are to be found in all large corporations. Our economies are built on fraud and other criminality.

In the UK the Financial Service sector accounts for 10% of GDP, in the US in 2010 financial companies accounted for 28.7% of all corporate profits. Without fraud our economies would collapse.

Maybe that is why we do not look. We live in a criminal dependency, afraid to look too closely at what is really going on – in a hole that we do not know how to get out of.